BlueScope Upgrades 2H22 Earnings Guidance On Higher Steel Prices

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BlueScope Steel Upgrades 2H22 Earnings Guidance On Higher Steel Prices

  • Earnings upgraded to $1.375 billion to $1.475 billion range, for the second half-year to June 2022
  • More than half of BlueScope’s current earnings derived from the US
  • Softer volumes in Australian Steel Products division arising from East Coast flood events and rail outages
  • US steel industry is consolidating, at a time of rising steel prices, leading to improved industry dynamics
  • No debt, strong operating cash flows, and increased steel production capacity supports positive medium-term outlook.

Earnings upgrade driven by strong US Coated Steel business

Better than expected steel prices and spreads for BlueScope’s painted steel products in the US has improved the Company’s earnings outlook, resulting in an upgrade of earnings guidance to the range of $1.375 billion to $1.475 billion, for the second half-year to June 2022. This is an approximate 12 percent upgrade from the previous guidance range of $1.2 billion to $1.35 billion.

This upgrade validates the Company’s ongoing expansion in the US in recent times, that includes the US$500 million acquisition of the Coil Coatings business in April 2022, the US$770 million investment in the expansion of North Star and the US$220 million establishment of BlueScope Recycling, as well as continued investment in the BlueScope Properties Group. North Star is a low-cost regional supplier of hot rolled coil steel, serving the automotive, construction and manufacturing end-use industries. BlueScope Properties is a developer of industrial properties, including warehouses and distribution centres. BlueScope’s US metallic coating and painting capacity is now 1.3 million metric tonnes per annum, in a large and growing region of the US. This brings the Company’s investment in North America to more than A$4.5 billon, employing 4000 employees, and sees BlueScope currently generating more than half of its profits from the US. This figure is set to increase substantially in the years ahead.

BlueScope is less upbeat about its other businesses, which are performing broadly in line with outlook comments provided to shareholders in February. Softer than expected despatch levels in the Australian Steel Products division, due to supply chain disruptions caused by the recent East Coast flood events, rail outages and pandemic-related impacts have all impacted domestic operations. Stronger raw material prices have required higher levels of net working capital employed across the Company. These negative impacts have been offset by stronger realised steel spreads and higher than anticipated contributions from the downstream businesses.

What’s Next

The US steel industry is currently transitioning through a period of consolidation and rationalisation, that should see a more favourable industry structure emerge for incumbents like BlueScope, in the period ahead.

As a global leader in painted steel products for building and construction applications, BlueScope’s US operations leave it well positioned to achieve long-term earnings growth through product development and branded products. At the Group level, BlueScope has no debt, strong operating cash flows, and increased steel production capacity at a time of rising steel prices and improved margins globally. These conditions are supportive of a positive outlook at least over the medium term.

BlueScope will release its full year financial results on 15 August.

Louis Mosmann

Louis Mosmann is a Private Wealth Client and Research Assistant at KOSEC- Kodari Securities. Louis covers macroeconomic events, global markets and ASX300 company announcements, allowing clients to make more informed investment decisions. Email Louis at

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